Today we find ourselves on two watches, one is a death watch and the other a birth watch.
The dollar is on life support and at the same time, the increasing frequency of contractions (see underlined time spans) signals the imminent birth of FreeGold.
Let's connect the dots:
August 4, 2007 - Jim Cramer pleads for a rate cut
Then, for the next seven (7) months, the Fed rate goes down, the dollar goes down, stocks go down and gold goes up. Finally, on March 16th, Bear Stearns collapses.
March 16, 2008 – Bear Stearns collapses and the Fed “surprises” the world with “only” a quarter point rate cut, showing its “hawkish” stance on inflation.
March 17, 2008 – Gold peaks at $1,033/ounce.
Then gold crashes, the dollar rises and stocks rise. But for the next four (4) months, things remain pretty much steady.
Then on July 15th, things change.
July 11, 2008 – INDYMAC bank is seized by the FDIC.
July 14, 2008 - This document is signed by the Comptroller of the Currency and the Director of the Office of Thrift Supervision.
July 15, 2008 - It is also signed by the Secretary of the Federal Reserve and the Executive Secretary of the FDIC.
July 16, 2008 – The above document is released which tells banks how much capital they must have. This is an international issue known as the Basel II Accord. It requires banks to be properly capitalized or else foreign (European) banks will be forbidden from doing business with them. These guidelines must be met by the end of the fiscal year, 2008, which is September 30, 2008.... TODAY!
July 15, 2008 – Gold again peaks, stocks hit new lows, and the PPT along with the world's Central Banks go into action. For the next two (2) months, stocks go up, the dollar goes up, and gold goes down. This is a massive intervention effort to give the remaining banks a chance to get in compliance with Basel II. To get recapitalized. Which didn't quite happen like they hoped.
September 15, 2008 – Lehman collapses. After this event, stocks go down, the dollar goes down, and gold goes up. Things get more intense, almost by the day, as the deadline draws near. For the next two (2) WEEKS breathless and frantic moves rule the day. The largest banks collapse and merge. Congress and Wall Street try desperately to get the taxpayer to pony up a nominal sum which, I assume, is supposed to help them make the deadline of TODAY. Doesn't happen.
Now we have Rosh Hashanah. This takes us into the new Fiscal Year. What does this mean?
We know the dollar is on it's deathbed. And the birthing contractions of FreeGold have gone from 7 months to 4 months, to 2 months, to 2 WEEKS. So what is the next one? If we assume acceleration it would be 2 days, putting us at Thursday or Friday. If we assume a straight progression, it puts us at October 7th, one week into the new Fiscal Year.
So help me fill in the blanks here. I'm starting from a big picture POV, but as they say, the devil is in the details. I will update this article if I think of something else. Please feel free to contribute in the comments.
Hat tip to Ender for his post on USAGold which got me thinking about this. Thanks!